Question 5 (12 marks) An ordinary share pays dividends on each 31 December and paid a dividend of $1.60 per share on 31 December 2019. The dividend is expected to grow at 6% in 2020, 15% in 2021, and thereafter 7% per annum perpetually. An investor purchased 1,000 shares on 31 December 2019 for $35 per share shortly after the dividend was paid. (a) Calculate the present value at 31 December 2019 of the dividend stream of 1,000 shares at a discount rate of 8% per annum. (3 marks) (b) Calculate the discounted payback period (in integer years) of the shares investment at a discount rate of 8% per annum. (4 marks) (c) The investor sells the 1,000 shares on 31 December 2022 shortly after the dividend was paid out at a price at which the new buyer would obtain an effective annual yield of 12%. Calculate the actual effective annual yield for the investor assuming that the dividends received are reinvested at an effective annual rate of 2%